Bitcoin Reorg: Could Binance get out and recover pirated funds?

One of the largest stock exchanges in the world, Binance, has been hacked. According to a statement, about $ 41 million in Bitcoin [7,000 BTC] was lost in this hack. According to CZ, hackers have been cautious and patient in the execution of hacking, which has allowed them to gain access and details to multiple user accounts. All Bitcoins collected from these accounts were sent in a single transaction.

A very small percentage of the Twitter community suggested that CZ could reorganize [chain reorganization] the Bitcoin network to recover these stolen BTCs. Jeremy Rubin tweeted,

@cz_binance If you reveal your private keys for pirated coins (or a subset of them), you can decentralize it at zero cost, coordinate a registration to cancel the flight.

– Jeremy Rubin (@JeremyRubin) May 8, 2019

A few hours later, in a previously scheduled AMA, CZ addressed this tweet and said that he would consider doing a reorganization. Subsequently, most members of the community opposed a reorganization. Subsequently, CZ tweeted that he would not advance the idea of ​​reorg.

What's a 'Reorg?'

According to the Bitcoin forums, "A reorganization (or reorganization) of the blockchain occurs when a string becomes longer than the one you are currently working on. All old chain blocks that are not part of the new become orphan blocks and their generations are invalidated. Transactions that use new invalid generated parts also become invalid. "

In this hypothetical scenario, CZ / Binance would encourage the miners / pooled pool by paying them BTCs to reorganize the chain, ie manually create a second chain and invalidate the chain that recorded pirate transactions.

A brief history of the reorgs of Bitcoin

There have been other cases in the history of Bitcoin where reorgans have made their heads,

1. August 15, 2010: An overflow / overflow bug caused the software to think that the transaction contained only a small amount of BTC, while in reality, the outputs together had thousands of times more than the 21 million that should exist. A new version of the Bitcoin software had to be released, the blockchain was forked and a new valid string passed the old block 74691 – 53 blocks after the initial fork.
2. March 11, 2013: When upgrading Bitcoin from version 0.7 to version 0.8, the chain was split in two and the chain lasted up to 25 blocks. The reorg was spotted and went back. This is considered the largest reorg of the Bitcoin history.
3. August 2016: Reorg was suggested by many members of the community when Bitfinex was hacked by 120,000 BTC. However, the reorganization suggestion failed.

Can Binance perform a successful reorg?

Reorganization to recover stolen or pirated funds becomes more expensive as more blocks are extracted after hacking. In addition, the reorganization also depends on the incentives the miners need, which in turn depend on the mining reward. In addition, the Bitcoin security model is based on economic incentives that prevent miners from working in large areas. In addition, these economic incentives tend to disappear when the possibility of gain is much higher than the usual miners' rewards, and if possible,

• it would take a massive hashrate to execute a reorg.
• it would hurt the Bitcoin "decentralized" network.

For these reasons, the community opposed the reorganization of the Bitcoin network and this is the same reason why the community is opposed to the reorganization for the loss of 7,000 BTC by Binance. In addition, organizing a cumulative hash power of 51% or more is easier said than done. Jimmy Song, a well known Bitcoin developer, has posted a thread on Twitter detailing the cost and hardship of a reorg.

1 / Verso of the mathematical envelope allowing a reorganization of 58 blocks (confirmations in progress for the tx who took money from binance):

Minimum cost: 58 * Btc 12.5 billion = 725 BTC (assuming that each minor would receive roughly the same transmission costs in the new chain and 100% of the miners would adhere to it)

– Jimmy Song (@jimmysong) May 8, 2019

Assuming that CZ would be able to collect the required hashrate for the reorg, he will always have to make sure that every minor is informed and coordinated to know on which "new" block to build, which otherwise might cause the eruption of many chains. According to Song, it would take 24 hours for CZ / Binance or 144 blocks to have hash power. Others were more pessimistic, some even suggesting that the reorganization was theoretically possible and that under the current circumstances, it would take at least 75% of the hash power to begin the reorganization.

The pirated transaction was seen in block 575,012, while at the time of publication, the current block was 575,114, a difference of 102 blocks.

Even if it manages to stick to the above, the reorg group would also face a challenge, as hackers could soften the agreement granted to minors and prevent the group from proceeding. Moreover, it would not be economical for CZ.

In the end, even if the reorganization was successful, the idea of ​​a "decentralized and immutable network" would be lost forever. In addition, each exchange could suffer a reorg, if hacked, which would also eliminate the chances that Bitcoin becomes a "store of value".

Reactions of the crypto community

People from across the crypto community, from Peter Wuille to Vitalik Buterin, to Mike Novogratz, have expressed their views on CZ's idea of ​​revamping the Bitcoin network. Most members of the community were outraged by the idea of ​​a reorganization. CZ, however, said in later tweets that the reorganization was a far-fetched idea and that the exchange would not take it into consideration.